21 Mar 2023

China Lesso’s FY22 turnover decreased by 4.0% YoY to Rmb30.8bn while NP decreased by 17.3% YoY to Rmb2.6bn. Turnover came in 6% below our expectation, however as the GPM beats our expectation, NP was only 3% short our estimate. The decrease in NP was due to impairment provision for the company’s receivables from customers, interest rate increases on borrowings and increase in the consolidated cost of products on the back of significant price fluctuation of raw materials and energy. To address the fluctuation of the raw material’s price, China Lesso managed to make timely adjustment on its ASP. GPM was able to maintain at a reasonable and healthy level of 26.8%. China remains as the core market of the company by accounting for 93.5% of the total sales, of which Southern China remained as its major revenue contributing market by accounting for 50.7% of the FY22 total sales.

CROSBY Research – China Lesso (2128 HK/BUY): The emergence of new growth engine